How did you start your coffee roasting business?

[tazzadiluna]

Hey everyone. I'm really interested to know from those who own a coffee roasting business on here, could you answer the questions for me below? This is just for my information, I'm writing a business plan to start a small roasting business...

1. Did you start selling from:
a. home
b. separate commercial space

2. If you answered a above, how long did you run it from home? Where did you sell? Did your business grow and move to a separate commercial space?

3. If you answered b above, was it just a place to roast and sell elsewhere (i.e. online or farmers market, wholesale only) or was it also a retail space? If it had a retail space, was it just to sell beans or did it also have a cafe?

4. What size roaster did you start commercially roasting with? How long did you roast with that?

5. Did you have to upgrade to a bigger roaster? If so, what size roaster(s) did you upgrade to?

6. What roaster(s) do you have now?

7. How long would you say it took you to see a profit? How long have you been in business?

8. If you had to do it all over again, would you do it exactly the same? If not, what would you change?

9. What knowledge would you wish to impart a person considering starting a coffee roasting business?



Thanks in advance, I hope they are not too many questions. I'm looking forward to your answers.


Angela

 

[Cafeciteaux]

Angela, Why are you putting together a business plan now with no benchmarks to begin with. Personally, I find that I only write a business plan when its time to go to the bank and beg for money. Having started several small and thriving business, not having a written plan has work well for me, but I will take a stab at your question.

1. b
2. see 1.
3. We are wholesale only with no storefront.
4. 10K and haven't moved up yet. (We roast a lot)
5. When we do, we are planning on just ordering an additional machine of the same capacity/brand.
6. We currently are running an Ambex YM-10 (great machine)
7. We have yet to see a profit. Reason, we reinvest all money into stock, automation, distribution equip, etc. I would plan on not making any money for at least a year. After that maybe you will be able to afford a small draw, but I wouldn't count on it.
8. If I had to do it over again.......... hmmm. Not much. Line up your sales ahead of time and get a jump start on marketing. Demand with little supply is a wonderful thing.
9. I would recommend getting some time on a commercial roaster if you havent already. I would also recommend learning as much as you possibly can about cupping and taste profiles. If you do not have a business & sales background, I suggest to find someone who does and befriend them. You may be the best roaster in the world, but coffee doesn't sell itself, and you will be competing with the big boys and your national/regional coffee shops for retail shelf space.

I hope that I don't sound to doom and gloom. Running a business is not easy and most people fail because they are completely unprepared for the amount of work that goes into it. I wish you well in your endeavour.

 

[tazzadiluna]

Hi Cafeciteaux.

Thanks so much for taking the time to respond. I guess what I'm putting together is not really a full up business plan, it's more like a mini business plan for me to build on. I'm not looking to give it to a bank since I'm not going to need capital for the very small operation I want to start with. It would just be for me, to write down and make sense of what I want to do.

I want to start a small roasting business from home, primarily selling to friends and family then locally at a farmers market or something. There is a cap on how much I can make from this at home here in Colorado which is fine with me since I can only do this part time right now. The earliest I can dedicate more time won't be until about six years from now. So on my plan I have some things written down that I want to do until then like yes, get some time on a commercial roaster, go to a couple of Coffee Fests, visit as many coffee shops and roasters as I can, etc. Then after that I will be ready to put together a true business plan.

Well, this $5000 revenue cap is starting to make me wonder how fast I would get there and if it's even worth doing? I don't want to start it and then only a year later, I reach the cap and I don't have the time and money to dedicate to this. And yet, I don't want to abandon it either. So I thought, "Should I just not worry about doing this until I know I can dedicate more time for it? Get all the experience I can get, not even bother doing it part time until then?" So, I posted the questions to get an idea how fast I'd expect to see growth on either one that was started at home first and one that is a brick and mortar from the start.

 

[eldub]

Cafeciteaux hit the nail on the head, as far as I'm concerned.

Btw, a $5000 revenue cap means you will be able to sell maybe three bags of beans before reaching the limit.

We committed to the project by renting a 1,200 sq ft space and buying a 12kg roaster. We've been in business a bit over a year and have plowed all profits back into inventory and infrastructure. I figured I'd be taking a regular draw by now, but a big uptick in business recently has meant that we need a lot more inventory on hand in order to keep offerings (especially our espresso blends) consistent.

Good luck.

lw

 

[tazzadiluna]

Hey thanks Eldub. I was afraid of that. That cap is going to creep up fast, then beyond that I'd have to get a dedicated space which I don't have the time and money for. I was thinking I could "rent" time on a roaster at an established roaster here in town and roast my beans there. I wouldn't have to worry about a cap if I did it that way. That would also give me experience on a bigger commercial roaster. What are your thoughts on that?

 

[expat]

Hey Eldub, don't you hate that uptick in business stuff!?! Same thing happens to us. Every time we think we're going to have some money to put aside and buy equipment -- like a monster grinder and a bagging machine -- orders increase and we've got to plow it back into buying more coffee which means processing it on the same equipment which means more nights up till 1 or 2am filling orders so we can deliver the next day.

I'm tempted to get a bank loan to get the equipment but I hate debt. We've self funded the whole way.

Oh well, maybe one day . . .

 

[Cafeciteaux]

Angela, not being familiar with the 5,000 cap on revenue (seems anti-business), does the law specifically state revenue or income? Also, does the law only apply to areas attached to the home? Reason I ask is that I have a friend who was able to get around all the ATF regulations and get his brewery approved by building a small shop in the back . Where there is a will, there is a way my friend.

 

[tazzadiluna]

Angela, not being familiar with the 5,000 cap on revenue (seems anti-business), does the law specifically state revenue or income? Also, does the law only apply to areas attached to the home? Reason I ask is that I have a friend who was able to get around all the ATF regulations and get his brewery approved by building a small shop in the back . Where there is a will, there is a way my friend.

I'm pretty sure it said revenue, but I'll double check. Good point, I'll find out what would get the cap removed...

 

[eldub]

I'm guessing it is indeed gross sales.

 

[tazzadiluna]

I looked it up again and it is a $5,000 cap on net sales (gross sales minus discounts, money returned, etc). It is called the Colorado Cottage Food Act and I guess it only applies to unlicensed home kitchens. Products must also be sold directly to consumers (which was what I was going to do) and wholesale is not allowed. Beyond the $5K will require a food license and a separate commercial facility. That makes sense. Pretty much, it's a hobby until you sell $5K.

Looks like I'll be running a hobby. I'm writing a hobby plan, Cafeciteaux.

Next thing I need to find out is what if I end up making more than $5K AND I can make time, does that "separate commercial facility" need to be at a facility in a commercial area/building or can I build a little shack in my backyard? Stay tuned...

 

[eldub]

It prolly depends on the zoning of your neighborhood.

 

[Ronc23]

Great info guys....I'm still at the infancy stage with building my business. I started roasting coffee for fun with a popcorn popper. After giving out sample roasts to friends and relatives I graduated into a Behmoor roaster. During this period I had this wacky idea that I could roast coffee and sell it to these same people to help my fund raising efforts for a few events I do through the year. Now I'm officially roasting with a very small commercial roaster and am ordering whole bags of beans and hopefully will very soon start to distribute to a few local stores.

My goal is similar to eldub and expat with self funding the growth of my business which has helped to keep my growth pace manageable. My full time gig is in the financial industry and I work with businesses within my role......which I've seen many fail and struggle because they are over leveraged. Sometimes decisions are made with this pressure of making the next loan payment and those typically don't work out. I would rather start slower and not carry the burden of wondering how I'm going to make my loan payment and really focus on building a solid product that people will enjoy.

Perhaps this 5K limit will challenge you to develop a solid business model to follow along building a strong customer base so you have the knowledge and backing to move to the next level.

 

[tazzadiluna]

Hi Ronc23,

Thanks for the encouragement. Yeah, that's where I am right now, I roast coffee for fun. I give it away to friends and family and with the stamped kraft packaging with valve I put them in, some even thought it was a "professional" roaster that did it. I tell them, nope, just a hobby and it's so fun! While I don't have time for a full time business right now (yes, I'm at that stage like you were, having a wacky idea that I could probably sell my roasted coffee), I'm just a little worried that cap is going to set me up for failure, so I want to do as much research as I can before I even start this. What commercial roaster did you move up to?

Angela

 

[peterjschmidt]

If you priced your coffee so you were making $5/lb. profit, you could sell 1,000lbs., yes? You could keep yourself pretty busy selling that much through a cottage industry outfit.

 

[tazzadiluna]

Hi Peter,
Yes, but the cap is net sales, not net income. So, if I sold $10/lb, that would be 500lbs, still decent. I was a little worried about reaching the cap too soon, but I read some more and one of the requirements is to have a disclaimer on the label that says something like warning: this product was produced in a home kitchen that is not inspected nor licensed by the health department. Basically, "eat at your own risk, blah blah." Great, thanks Colorado. [Throws arms up in the air] Maybe I should just forget this altogether and wait until I can dedicate full time. Can't wait til our next duty station. Haha.